188 - How To Determine The Amount of Capital I Need To Get Started

In this episode, I answer a question from “Blake” who is a lister of the podcast.

 

Blake asked:

“I just recently began listening to the podcast and it has changed my mindset about real estate investing. I graduated from college a month ago with zero student debt and a great career with a very high earning potential. My biggest question is how much capital do I need to begin this journey of wealth?

“And when that number is attained, what resources can I use to be the most educated possible (books, podcasts, seminars, etc.)?”

“Also, I’m a Dave Ramsey follower as well and want to know how I can build this empire without going into debt or ramping up unmanageable debts? Any help would be incredible. Thank you!”

The answer to how much capital is needed really depends on how much time and effort do you plan to invest in the adventure of real estate investing.  If you save $150,000, for example, you could buy a duplex or triplex in most markets, it some markets maybe even a four unit.  But then you are done until you save AGAIN.

Instead, learn to raise money from others and help them experience good returns which means you can do more good in the community. 

You can start with $100 for example, and learn to generate leads for investors and motivated sellers.  Those leads can be converted to cash.  With no leads, you are forced to buy what’s for sale and usually wind up overpaying.  CashFlowGuys.com/OneFunnelAway is the affiliate link to get 30 days of daily coaching by Clickfunnels

I prefer someone to start without capital because they are less likely to get themselves into hot water due to the lure of easy credit and “deals” everywhere as being offered by the sharks in each market.  Banks and hard money lenders will lend to just about anyone without regard to the investment quality of their purchase, remember that!  Instead, they often focus on the borrower and not the asset, especially residential type loans. 

There is nothing more dangerous than a new investor with some cash and great credit.  With a bunch of leads to work with, the new investor gets to learn by doing and therefore develops a sharp sword in business.  It's easy to pay cash as our friend Larry Harbolt teaches us, and it's that cash that often gets us into deep trouble.

Which resource you use to educate yourself really depends on the medium that most resonates with you.  For me, it’s a video when I am searching for a how-to on a specific task.  Along with that, I appreciate the search engine capabilities of YouTube to quickly provide me the content I need based on what I type.

When looking for more of a passive or non-task related education I prefer audio books as my first choice and written books as my second depending on what I am doing.  What I dislike about audiobooks is that it is tough to take notes and such when my hands are otherwise occupied by driving or working on something.

I don’t believe it is possible to build a real estate portfolio to the point it will support you to any degree without taking on mortgage debt (aka good debt).  Uncle Dave Ramsey over leveraged when he was in real estate and lost sight of the monthly income generation model when he invested in real estate.  He focused solely on appreciation and ignored all of the other benefits which is what got him into hot water.  Instead, focus on monthly net profit after expenses.  The number of units does not matter as much as the quality of each investment that you add to your portfolio.